Regulation is viewed as governmental and public intervention via laws and rules applied by agencies like the FAA which is quite correct. It's felt as something negative and painfull - Burt Rutan witnessed that.

The explicit intentions behind the regulation are positive ones in principle - keeping safety of third parties against damages, death and the like.

So what about replacing the - negative - regulations by incentives designed to "make" innovators to keep or improve safety of their own?

Such incentives might mean that the FAA would assist innovators merely than prevent or regulate them. The FAA wouldn't have to check if a new space vehicle causes dangers etc. but they would check if the design reduces or removes dangers in comparison to other already existing vehicles. The FAA would check if the idea behind the vehicle involves the intention to reduce and/or handle dangers and problems better or more properly.

The incentives could be reduced barriers to get licences by the FAA but they also could be reduced taxes and charges reflecting reductions of otherwise required public expenditure for safety of third parties.

Burt Rutan is on record as saying that he wants the FAA to regulate passenger safety.

Quote:

I believe the ability to insure will be greatly improved if the government steps up to the responsibility to require an operator to show his passenger safety by adequate flight and ground testing.

This has put him at odds with much of the rest of the suborbital space tourism community, but I suspect he is right. If there is a crash, the responsible company can shield itself from legal action by showing that they complied with all government safety regulations and inspections.
http://gop.science.house.gov/hearings/s ... /Rutan.pdf